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With the recent news of 15 store closings resulting in 900 layoffs by Best Buy/Future Shop, and 700 additional layoffs by Sears, which closed several stores last year, Canadians might see the headlines and be concerned about the health of the retail sector.

For those who were laid off, the news is devastating, but the closures are more about retail evolution and not a reflection of a dismal marketplace. Overall, the retail sector is showing signs of expansion and broad-based health. Colliers International Consulting expects that when the full-year national retail sales data for 2012 are released next month, they will show another year of moderate, sustainable growth of approximately four per cent for the year.

Canadian retail has made a major departure from U.S. retail trends since the Great Recession of 2008. The last year in which Canada showed a decline in annual sales was 2009 when $415.4 billion spent at retailers was $12.5 billion less than in 2008. The bulk of that decline was felt in Ontario, Alberta, and B.C.

The year 2010 marked a dramatic return to growth, with national sales of $438.5 billion. This signalled that Canada had emerged from the Great Recession, and that our economy was not beholden to the U.S. for growth. As the Canadian and U.S. economies tracked along separate paths from 2009 through 2011, the Canadian dollar gained strength relative to the U.S. dollar.

The rising value of the Canadian dollar has had positive and negative impacts on the Canadian retail industry.

First, more buying power increased Canadians’ appetite for cross-border shopping (and reduced Americans’ appetite for same). Canadian malls close to the border have seen noticeable drops in weekend traffic volumes when the Canadian dollar is high, and anyone who has tried to cross the border can tell you where Canadians who live near the border are.

The Canadian government’s inexplicable and ill-timed move to increase cross-border duty-free spending limits last year certainly added to Canadian retailers’ woes.

But there is an upside. The more lasting impact of a strong Canadian dollar has been to highlight the strength of Canadian retailers, shopping centres and consumers.

When U.S. businesses convert Canadian incomes and per capita retail sales to U.S. dollars, it is a much more compelling market to do business in when our dollar is worth $1.05 US than when it is worth $0.80 US. Canada has never seen as much interest from American and international retailers and developers as it has in the last three years.

So, while Best Buy and Sears are adjusting to try to find a model that works within a changing retail world, Target will open 123 stores in Canada this year, and will hire more than 25,000 people to staff them.

Meanwhile, Walmart will grow its Canadian network to 388 stores by investing $450 million in construction and other costs. Canadian Tire, Loblaw and other Canadian retail icons face shrinking market share as Target will pull a larger share of Canadians’ spending than the Zellers stores they are replacing.

Nordstrom’s protracted Canadian rollout of four stores will disproportionately affect headlines and water cooler chatter relative to its real impact on the industry. More significant would be if the Hudson’s Bay Company can make chain-wide improvements that match its outstanding downtown Vancouver flagship store.

The oil and gas sector will continue to spur Alberta and Saskatchewan’s nation-leading sales growth and development activity will likely continue, although not at the torrid pace of the last few years. Ontario and Quebec still represent well over half of national total retail sales. If our dollar weakens due to strengthening U.S. jobs and housing markets, the important manufacturing sector in Central Canada could drive sales growth that dwarfs other regions simply due to scale.

Finally, Canadians will see development of the first true outlet malls north of the border. Over a dozen outlet malls are being built and will open in 2013 and 2014. Metro Vancouver will have at least three new malls open in the next 24 months, two of which will be outlet-themed.

James Smerdon is vice-president, director of retail consulting, at Colliers International.

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